HELVEA Swiss Equity Conference 2009 Ueli Dietiker, CFO Swisscom Bad Ragaz, 16 January 2009 Agenda 2 1. Nine months 2008 results 2. Strategy 3. Customer Orientation 4. Organisation 5. Swisscom Switzerland 6. Cost savings 7. Fastweb 8. Economic cycle 9. Credit considerations 10. 2008 guidance 1. Nine months results 2008: In a nutshell Comments Key financials in CHF mm Net revenue EBITDA EBITDA margin EBIT Net income 1) SCM net income EPS 3 2) 3) CAPEX OpFCF Net debt FTE 30.09.2008 YOY 9,085 3,615 39.8% 2,066 12.4% 10.4% 1,316 -19.4% 1,313 -19.3% 25.35 1,365 2,124 9,904 19,995 -19.3% 1.6% 32.6% -5.8% 1.7% 5.2% 1) Net income before minorities • - Net revenue: CHF +1,003 mm - EBITDA: CHF +340 mm • Like-for-like* top-line slightly up: traditional business declines over-compensated by growth from new subs (BB and Mobile) and new businesses (IPTV, iPhone, mobile data, ICT) • Like-for-like* EBITDA slightly down (-1.2%) mainly due to high cost of introduction iPhone • SCM net income down mainly because of an exceptional charge for the early termination of cross-border leasing transactions in Q2, and high profit in Q3 2007 from sale Antenna Hungária • CAPEX overall flat: 2) Net income to Swisscom sh'holders (excl. minority interests) 3) Avg. # of outstanding shares as per 30 September 2008: 51.802mm • * Like-for-like excludes divestments in 2007 (Antenna Hungaria, Accarda, Infonet) and Fastweb in 2007 and 2008. Headline figures up mainly due to 1st time consolidation of Fastweb: - Fastweb consolidation +CHF 248mm - Swisscom standalone Capex down 21.2% YOY esp. due to lower VDSL costs) OpFCF up by CHF +522mm (+33%), largely from higher EBITDA, lower Capex and better NWC development. Fastweb delivered CHF 242mm of the total increase in OpFCF 2. Strategy: 3 pillars, 1 outcome Maximize 4 Extend the existing business Expand to deepen the business to widen the business by by by by improving driving offering moving into and fortifying market position cost down, focusing on valuable business a completer portfolio of services increasingly cash generative business Use proceeds to optimize payouts to shareholders while securing efficient capital structure 3. Paradigm change: From technology to customer focus Technologies: Fixed 5 Mobile Sofar separated technologies converge to single All IP All IP enabling the delivery of a wider range of services for increasingly diverging customer needs Customers: Residential Small & Medium Enterprises Corporate 4. Organisation: Aligned with strategy 6 CEO Swisscom Group Maximize 9 9 Extend 9 9 Expand Swisscom Participations Fastweb Networks & IT Wholesale Corporates SME Residential Strategy Swisscom IT Services Swisscom (Switzerland) Organisation 9 9 9 5. Swisscom Switzerland: The cash generator Market shares YE 2007 • • • • Mobile voice: Mobile data: Fixed voice: Broadband: 78% 88% 70% 43% Market shares YE 2007 • • • • Mobile voice: Mobile data: Fixed voice: Broadband: 83% 83% 84% 63% Market shares YE 2007 • • • • Mobile voice: 62% Mobile data: 55% Fixed voice: 65% Broadband retail: 50% Focus products • • • Voice Broadband Roaming Factory • • Mobile networks Fixed networks CBU 5‘000 MNC’s & Large Corporations 7 Financial results 9 months 2008 Revenues: CHF 1,393mm Contribution Margin: CHF 680mm + SME 300‘000 Small & Medium SoHo’s Revenues: CHF Contribution Margin: CHF 865mm 634mm + RESIDENTIAL 3,2mm households 7.5mm inhabitants WHOLESALE 145 Telco providers- nationwide Revenues: CHF 3,869mm Contribution Margin: CHF 2,210mm + Revenues: CHF 1,249mm Contribution Margin: CHF 427mm + NETWORKS, IT and SUPPORT Swisscom Switzerland Contribution Margin: CHF -1,079mm EBITDA: Capex: CHF CHF 2,874 mm 732 mm FCF proxy: CHF 2,142 mm = 6. Efficiency initiatives: Short and medium term cost improvements Group HQ & Other Swisscom Switzerland Small & MediumSized Enterprises Residential Customers Corporate Business Short term Savings from new organisation (one shared services, reduction of M&S overlaps, less real estate, system optimisation) Network & IT Medium term Savings from one single All-IP network with TDM switch-off in 2013 cumulative cash-out (2008-2010): CHF 250mm base line base line savings ~CHF 100-120 mm pa 2007 2009 beyond savings ~CHF 330mm pa 2009 2011 2013 beyond 8 7. Fastweb: The growth generator Customer Base Growth 9 EBITDA Growth 1 26% 19% 3 17% EUROPEAN OLOs AVERAGE 15% 2 FASTWEB FASTWEB expanding its broadband customer base significantly faster than most European Altnets: FASTWEB broadband net adds market share steadily over 20% in 2008 TI dominant position in retail broadband (61% market share) offers additional opportunities 1 EUROPEAN OLOs AVERAGE 2 FASTWEB FASTWEB EBITDA growth well above average: EBITDA margin steadily over 30% in 2008 (average Altnet = 25%) Absolute EBITDA contribution to outpace Capex by > € 100mm in 2008 Fastweb contribution to OpFCF (i.e. shareholder returns for Swisscom shareholders) CHF 242 mm by 30.9.2008 Comparison based on fixed line broadband customers Average calculated on the basis of 1H 2007 and 1H 2008 published results of Iliad, HanseNet, Tele2, Telenet, Tiscali, United Internet, Versatel and Wind (Fixed Line) 3 FASTWEB EBITDA excludes EUR 30 mm extraordinary item booked in 2Q 2008 2 8. Economic cycle: Robust in uncertain times (1/2) Swisscom • • • • • Order intake at Segment Swisscom CBU not significantly impacted Exposure to banking/insurance sector limited: 16% of CBU sales and 3% of group sales Highest sales of the year in Sept and Oct at SME Swisscom IT sales in Oct best of last 3 months, and offer-requests highest of the year Residential sales in Oct just above average of both past 12 and past 9 months CBU Weekly Order intake (1.1.2007 – 5.11.2008) 10 8. Economic cycle: Robust in uncertain times (1/2) 11 Fastweb • Order intake from corporate accounts in Sept and October trending back up again from annual holiday dip in August • Sales continuing to grow, also Sept and Oct above 9 month average • No meaningful difference between sales trends for residential and corporate accounts Index (avg. of first 9 months 2008 = 100) 140 100 60 20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Total revenues revenues retail revenues business (excl WS) order intake 9. Credit considerations: Refinancing schedule CHF mm 4'000 3'500 3'000 2'500 2'000 1'500 1'000 500 - 12 • Swisscom‘s rating is „A-, stable“ (S&P) and „A2, stable“ (Moody‘s) • Gross debt of CHF 12.3 bln is either in CHF or fully swapped into CHF As a result Forex swings do not impact debt level • CHF debt typically come at 1.5-2% lower interest rates than € debt • Outstanding debt at extremely favourable conditions in light of the . current market conditions • Refinancing schedule safe with first larger tranche in 2011 2008 2009 2010 2011 2012 Bank debt/private placements 2013 2014 Bonds 2015 2016 2017 2018 >2018 CBL-Leasing transactions 10. 2008 guidance: Likely to be achieved Swisscom Group 13 2007 Change 2008 E over 2006 over 2007 Net revenue in CHF bln 11.1 15% EBITDA in CHF bln 4.5 19% 4.8 7% CAPEX in CHF bln 2.0 51% 2.1-2.2 5-10% OpFCF in CHF bln 2.1 -5% 2.4-2.5 15-20% in CHF/share 20 18% in CHF bln 2.1 31% in CHF/share 39.9 38% per YE 19,844 16% Payouts per share 1) Net income Earnings per share Number of employees 1) Change 12.3 11% Payout 2007 consisted of ordinary payment of CHF 18 and extraordinary dividend of CHF 2 per share, both paid in April 2008. Payouts in general are defined as approx. 50% of OpFCF, and can be in the form of dividends and share buy backs. Q&A Cautionary statement regarding forward-looking statements ”This communication contains statements that constitute "forward-looking statements". In this communication, such forward-looking statements include, without limitation, statements relating to our financial condition, results of operations and business and certain of our strategic plans and objectives. Because these forward-looking statements are subject to risks and uncertainties, actual future results may differ materially from those expressed in or implied by the statements. Many of these risks and uncertainties relate to factors which are beyond Swisscom’s ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors detailed in Swisscom’s and Fastweb’s past and future filings and reports, including those filed with the U.S. Securities and Exchange Commission and in past and future filings, press releases, reports and other information posted on Swisscom Group Companies’ websites. Readers are cautioned not to put undue reliance on forward-looking statements, which speak only of the date of this communication. Swisscom disclaims any intention or obligation to update and revise any forward-looking statements, whether as a result of new information, future events or otherwise.” For further information, please contact: phone: +41 31 342 6410 fax: +41 31 342 6411 investor.relations@swisscom.com www.swisscom.ch/investor 15